Economic Prognostications 2010

It would be great if you read those predictions to start out with, and also read my economic primer, but if you are strapped for time here is the summary.

1. I first predicted that the Dow would not rise above 10,000 in 2009. Low and behold, it hit that mark in November. Couldn’t it hold out 2 more months for me to be right? haha.

In any case, I must thank Kent @ The Financial Philosopher for making me do a counter argument. While it was unlikely it would rise that high, it did happen, and I think I explained pretty well why it happened in the comment section of that post. As for the second predication that it wouldn’t rise above 10,000 over the next 5-10 years. Well, that was a little crazy, and wasn’t based on anything more then my pessimism at the time. Moving on…

2. My second prediction was that housing prices would drop another 10%, half of which would be caused by the increasing unemployment rate. Looking at the data now, I really can’t say conclusively whether this happened or not.

For one, the census bureau won’t wrap up their data analysis till sometime in February. I also failed to remember how I came to my conclusions in the first place.

There are only two solid conclusions I can come to: That there was an additional decrease in housing prices in 2009, but by what percentage I am unsure. Also that there was a degree of stabilization in the market overall.

3. I predicted that immigration will remain high. This is almost a no-brainer. Obama would like to eventually give illegal immigrants a better pathway for gaining citizenship. If that happens, and immigration quotas are raised, we will almost assuredly see a huge surge in new immigration.

4. I predicted that unemployment will rise above 10% in 2009. Check. I went even further to say that it will stabilize around 7-9% in 2010. Hmmm. Maybe a bit too ambitious. We will see… (Unemployment spent most of 2011 around 9% dropping to 8.6% at the very end)

So I was either right on, or slightly off. We will see the final figures in a month or two. As for 2010 I will make some simple predictions…

1. Forget the stock market. Gold prices will continue to rise. Yes, gold is almost ridiculously priced right now. It will continue to rise however. With what the government is doing right now, they are causing a lot of inflationary fears. Enough people are buying into that fear that they will continue to buy into gold. Today’s price of gold is $1,138.30 per ounce. I wouldn’t be surprised if $1,300.00 or $1,400.00 was out of the question. (Gold started off 2010 at 1,100 and surged to 1,400 by Jan 2011 just as I predicted. It surged up again over 1,700 but dropped to finish 2011 around 1,600. Gold is still a great long term investment)

2. Going against last year’s predications, somehow, someway, the Dow will rise to over 11,000 or 12,000. My only basis for this is my understanding of money and the need for people to invest it somewhere. The stock market somehow remains still one of the number one places to invest despite it’s lack of sensibility. (The Dow started around 10,600 in 2010, went up to 11,200, then down to 9,600 and finished at 11,600. It then rose to 12,800, sunk to 10,600, then it is currently at 12,000 in Jan 2012. I’ve predicated another wild bumpy year for 2012, with the Dow as high as 14k or as low as 10k.)

3. As for housing. Who knows. I thought unemployment was the trump factor last year. This year it’s housing. It will be a make or break year. This is the year we will see if the housing stimulus, and record low interest rates will save the housing market. So far the numbers look promising, but anything can happen. My predication is that we will start seeing modest house price increases across the board in all but the worst of locales. For example, Detroit & the rest of the rust belt, and probably California & a few other states that were hit the worst. Those areas will still experience declines, albeit modest ones… (Home sales are up, but prices are still down for 2010 and 2011.)

4. Unemployment. *sigh* Its rough and will continue to be rough. Federal policies, as well as banking policies, are making it tough for new and small businesses to hire and experience growth. My original prediction of a job recovery in 2010 is a bit unfounded. I thought more people would make the shift to entrepreneurship, but that doesn’t seem to be happening in large enough numbers.

What is also intriguing is the number of people who get removed from the official unemployment list. The number of people that “stop searching for work.”

I predict that unemployment won’t go below 10%, and may go up to 11 or 12%. I’d like to be more optimistic here, but I just can’t. (as I mentioned, 2010 had unemployment in the high 9% range, while 2011 had unemployment in the low 9% range falling to 8.6%.

I have some other ideas about the economy, but I feel they would be best served in separate articles, and certainly wouldn’t count as official predictions anyhow.

The “economy” is something that I would rather steer clear of at present. Things are so volatile that whatever approach you take you’re likely to be burnt. The stock markets are something to avoid at all costs, as paper is just that…and boy does it burn easily!

There is talk of a second wave of housing foreclosures looming, and as far as immigration is concerned, how can this continue unabated when jobs are being outsourced and manufacturing moved offshore?

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I think it is going to be better and better. Not only national economy but the world wide connection web of financial rivers will flow again. It is the natural process where after times of recession huge up is coming. This is re-written scenario and happened many times before.

Well, after the whole unpredicted crisis in Greece and the oil spill in the gulf, it is really hard to foresee the rest of the year. In January, i was assuming that the recovery would show its effects in the 3rd quarter, but that didn’t happen yet.